Infratil nabs Goldman, Barrenjoey, UBS for $1b CDC data centre...

Infratil nabs Goldman, Barrenjoey, UBS for $1b CDC data centre play
by garnered valuations,
copyright linkJune 17, 2024
Infratil will raise about $1 billion to strengthen its balance sheet and fund expansion plans at its CDC data centre business, marking yet another major transaction for the capital-intensive data centre industry.Barrenjoey, Goldman Sachs and UBS led the deal, which included a fully underwritten placement of roughly $NZ1 billion ($928 million) in new shares and a $NZ150 million retail offering. Both were sold for $NZ10.15 apiece, a near 7 per cent discount to Infratil’s share price last Friday.Infratil’s latest equity raise will allocate $NZ600 million to Canberra’s CDC data centre operator. Headquartered in Canberra, CDC is the largest private data centre operator in Australia and New Zealand, with 268 megawatts in capacity spread across 13 facilities, while a further 265 megawatts is under construction in Sydney, Melbourne, Canberra and Auckland.Infratil will inject $NZ600 million to grow CDC over the next two years as it projected a sharp rise in demand for data centres, RBC Capital Markets analyst Owen Birrell said in a note to clients on Monday. The New Zealand-based infrastructure investor holds the largest stake in the business with 48.2 per cent, while the Future Fund and Commonwealth Superannuation Corporation have 25 per cent each.In addition to the $NZ600 million, Infratil could turn to debt markets for the rest of its capital expenditure needs at CDC, Mr Birrell said.
The company expected capex requirements at the data centre operator to reach between $2.3 billion to $2.6 billion by the 2025 financial year.Local data centre developers from AirTrunk to NextDC have well into the billions as large technology companies such as Amazon and Microsoft clamour for space to store swaths of data. The centres are also major users of power, and have relied on banks and the capital markets to build the storage infrastructure needed for consumers’ insatiable appetite for data.“Demand continues to accelerate on the back of cloud adoption and significant investments in generative AI [artificial intelligence],” Infratil chief executive Jason Boyes said on Monday.“CDC continues to see a surge in demand for data centre capacity.”Shoring up the balance sheetInfratil’s stake in CDC has been independently valued north of $4 billion, some 10 times more than the $392 million it paid for it back in May 2016. Last October, Infratil calculated that, based on the value of its holding, CDC was valued at more than $8 billion.
CDC’s earnings before interest, tax, depreciation, amortisation and fair value adjustments guidance of $260 million to $270 million implied an EBITDA multiple of more than 30 times, The Australian Financial Review’s Street Talk column reported last October.Outside of plans to expand CDC, Infratil will use the remaining $NZ400 million from the underwritten equity raising to strengthen its balance sheet, which took a hit after it acquired One NZ, the country’s largest wireless carrier, in June last year.RBC’s Mr Birrell said the purchase from Brookfield Asset Management – which led Infratil to raise $NZ850 million in equity – caused a drop in free cash flow, while its “balance sheet was unable to support its growth ambitions” and share of capex needs for the 2025 financial year.Infratil’s capex requirements for the next year comprised between $2.3 billion and $2.6 billion for CDC, up to $US1.3 billion ($1.9 billion) at renewables developer Longroad Energy, and $240 million to $270 million at One NZ.After the capital allotment for CDC, Infratil should have $NZ1.2 billion in available liquidity.“The focus on the market post-equity raise will, in our view, be largely on operating cashflow outlook, and whether [Infratil] will recover sufficiently to support the additional capital costs [interest and dividend payments] of the proposed development over the near term,” the RBC analyst said in his note.